A figure reflecting the cost of the product or good that a company sells to generate revenue, appearing on the income Statement as an Expense unto itself. Also referred to as "cost of sales."

COGS is the costs that go into creating the products that a company sells; therefore, the only costs included in the measure are those that are directly tied to the production of the products. For example, the COGS for an automaker would include the material costs for the parts that go into making the car along with the labor costs used to put the car together. The cost of sending the cars to dealerships and the cost of the labor used to sell the car would be excluded.

The accounts included in the COGS calculation Will differ from one type of business to another.